ABSTRACT
After 1945, the regulation of international financial markets became more intense and widespread as part of the system designed to avoid the chaos that had characterized international economic relations in the 1930s. This chapter examines how the postwar consensus about the usefulness of regulating capital flows evolved after the advent of current-account convertibility in 1959. It develops the history of prudential regulation and supervision of international banking that began after the end of the Bretton Woods system. A second theme of the chapter is the enduring conflict between the desire to have national sovereignty over financial markets on the one hand, and the need for supranational oversight to ensure consistency and enforcement of prudential supervision and regulation in an increasingly global market. The prudential regulation introduced in the 1970s proved inadequate to cope with these pressures, particularly on the assessment of country risk, and the transparency of syndicated lending.
